World Cup Won’t Be a Game Changer for Brazil

Protesters demonstrate against an increase in bus fares in Rio de Janeiro.

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As many as 600,000 tourists are expected to flock to Brazil this summer for soccer’s biggest tournament.

Will that translate into a meaningful boost to South America’s largest economy? Don’t bet on it, Moody’s Investors Service says in a report today. For all the eyeballs and visitors the World Cup will draw, they say the event is likely to have “fleeting effects” on Brazil.

But the Brazilian economy will also have to contend with lost workdays and a reduction of business activity during the June 12-July 13 tournament. The net impact: something of a wash, the ratings firm says.

“We see little impact on Brazil considering the limited duration of the World Cup and the size of the country’s economy,” Moody’s said.

“Crowding and traffic will make it more difficult to move goods and provide services, and may dissuade consumers from routine daily shopping, hurting apparel retailers, drugstores and retail fuel sales, for example,” Moody’s says. Ditto for the country’s massive resource sector, including iron ore mining and sugar and coffee growing.

Long-term effects from the tournament are likely to be limited to changes in how the country is perceived rather than an immediate boost or hit to companies’ bottom line, Moody’s says. A smoothly run tournament could lift confidence in Brazil’s government and corporate sector. But the danger is that a poorly-run World Cup adds to the laundry lists of disappointments Brazil’s faced in the last year or so.

In 2007, the year soccer’s governing body awarded the World Cup to Brazil, the country’s economy expanded by 6.1%. Brazil was an investor darling, supplying the first letter in the BRIC (Brazil, Russia, India, China) moniker applied to the emerging markets economies on a tear amid a commodities boom and a surge in investment in the developing world.

A repeat of the deadly protests that marred a tournament dry-run held in June would likely do further harm to Brazil’s image, Moody’s says. Same story if Brazil’s shiny new infrastructure isn’t able to accommodate the inflow of tourists.

And even if there aren’t any crippling protests, the benefit from a gigantic global sporting event held in a soccer-mad country may be a drop in the bucket.

The games last just a month, “and the associated economic stimulus”—which Moody’s pegs at $11.1 billion—“pale before Brazil’s $2.2 trillion economy.”

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